A boardroom exodus at Genel Energy gathered pace yesterday when Nat Rothschild, the financier, followed Tony Hayward, the former BP boss, in quitting the troubled oil explorer that they brought to market six years ago.
The departure of Mr Rothschild, one of Genel’s biggest shareholders, was accompanied by that of Simon Lockett, the former Premier Oil chief who served as a non-executive director.
Mr Hayward, Genel’s chairman and former chief executive, and Chakib Sbiti, chairman of the remuneration committee, are due to step down formally at the end of Genel’s annual meeting today, while Ben Monaghan, chief financial officer, is leaving at the end of the month.
Genel Energy was formed in 2011 when Vallares, an investment vehicle floated at £10 a share by Mr Rothschild, Mr Hayward and two other founders, took over Genel Enerji, a private Turkish-based company operating in the promising Kurdish region of Iraq.
By March this year shares in Genel had fallen to less than 60p after a torrid few years in which the company was hit by the rise of Islamic State, which reduced payments for oil from the Kurdish regional government, the global oil price crash and downgrades to its Taq Taq oilfield.
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In recent weeks shares have rallied from their lows, spurred in part by takeover hopes after Western Zagros Resources, another producer in Kurdish Iraq, was bought out. Last week Genel disclosed that Daax Corporation, a little-known company from Azerbaijan, had amassed a stake of more than 10 per cent in it.
However, the news of the latest departures unsettled investors, sending Genel’s London-listed shares down by 11½p, or 11 per cent, to 87¼p last night.
Mr Rothschild, Mr Hayward and the other founders, who together put £100 million into Vallares, have lost the majority of their investments, with their shareholdings worth only about a fifth of that yesterday.
The departures of Mr Rothschild and Mr Lockett leave Stephen Whyte, Genel’s incoming chairman, with a challenge to rebuild the board, which will be reduced to six people after the meeting, with only two independent non-executive directors. Analysts at RBC Capital Markets said that Mr Whyte, who spent much of his career at Royal Dutch Shell, was likely to face questions today “about a new direction for the business, the influence of new shareholders and the make-up of the new board”.
The latest announcement “suggests that more substantial changes are afoot”, they said. “Shareholders will be hoping that the Genel reboot is accelerating. However, we would caution that the departure of major shareholder Nat Rothschild suggests to us that the company’s new direction could include some dilution of existing shareholders, perhaps as a result of a deal — merger or acquisition — rather than an equity refinancing.”
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Another city analyst said that investors would be concerned that Genel had lost “a lot of the independent, industry-experienced members of the board”. The analyst added that the risks involved in the company “makes it uninvestable for many long-term investors”.
Genel investors will be asked today to approve its decision to boost the pay of Murat Ozgul, chief executive, last year and to increase his long-term bonus potential.
Behind the story
With all-star backing from a former BP chief executive, a City financier and a leading investment banker, there was plenty of excitement around the creation of Genel Energy in 2011. The men were taking over a promising operator in Kurdish Iraq, “the darling of the exploration and production world” in the words of one analyst, a region with low operating costs and strong production growth.
The only catch was political risk, yet many appeared happy to shrug that off. For shareholders now nursing losses of more than 90 per cent, the optimism was woefully misplaced.
First, the political risk escalated dramatically with the rise of Islamic State. As oil prices crashed, the Kurdish regional government was forced to divert cash to fighting extremists rather than paying for crude. Then Genel was forced to slash estimates for its prized Taq Taq oilfield, from 683 million barrels to 356 million and then 267 million barrels.
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As the analyst put it: “People thought the issue was the politics. It turns out the issue has been the rocks.”